Y0 y theonsetofarecession theonsetofarecession

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Unformatted text preview: and Growth Vertical need not mean fixed LRAS can shift right – – – P Population Capital stock Technology Real GDP rises Prices fall – Good deflation – AD can also shift right LRAS LRAS’ P0 P1 AD y0 y1 y Short Run Aggregate Supply Short Run Aggregate Supply “Sticky “ wages and prices – Contracts – Menu costs P AS AS slopes up – Price rises – Value of labor rises – If w fixed then L rises – y rises as a result y What Causes a Recession? What Causes a Recession? Assume we start at y0 – In LR equilibrium – Investment...
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This note was uploaded on 02/25/2014 for the course BUSINESS 2101 taught by Professor Gerst during the Spring '12 term at Temple.

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